Mackinac Center President Calls for Eliminating SBT Through Spending Cuts, and for Deregulation of Telecom

Would exempt schools from Prevailing Wage Act: “Can’t support kids without euthanizing this dinosaur”

For Immediate Release
Contact: Chris Bachelder, Director of Communications
Phone: (989) 878-1837

MIDLAND — Speaking on the "state of the state" today in Lansing, Lawrence W. Reed, president of the Midland-based Mackinac Center for Public Policy, called Michigan’s recent economic figures "sobering," but said his message was "optimistic" and encouraged state leaders to have "the courage to focus on the fundamentals, and to fight the all-too-human tendency to define our possibilities down." Reed’s specific recommendations were intended to improve Michigan’s economy through spending cuts, tax cuts, regulatory reforms and education policy changes that have been proposed by the Mackinac Center, a research and educational organization that studies state and local public policy.

Reed recommended state spending cuts that included competitively contracting the management of Michigan’s corrections system to a for-profit firm (an estimated savings to the state of more than $350 million annually); ending so-called "state economic development" plans that distribute tax subsidies and other special breaks to specific businesses; and a Medicaid insurance voucher plan to rein in Medicaid spending by allowing recipients to "choose services and insurers that most closely match their needs." In his comments on economic development initiatives, Reed pointedly remarked that the Michigan Economic Development Corporation, which oversees these programs, "produces more self-serving press releases than it does jobs."

Reed cited "hundreds of millions of dollars" in spending cuts that had been proposed by the Mackinac Center and noted that such cuts, despite the projected budget deficit for fiscal 2006, would allow the state’s Single Business Tax to be eliminated altogether within the next "two or three years." Reed pointed out that the Washington, D.C.-based Tax Foundation had ranked the Single Business Tax the worst state corporate tax in the nation, and he argued that "freed of that burden, Michigan’s economy would rapidly blossom." He also commented on Gov. Jennifer Granholm’s proposal to reduce the SBT as part of a plan that would reportedly involve no net tax cut, saying that it appeared it "might be a net plus," but that "it’s a pale thing compared to what the state of Michigan needs, and compared to eliminating the SBT."

Reed called for major regulatory reforms, beginning with Michigan’s Telecommunications Act, which will sunset at the end of this year. The state Legislature and the Granholm administration, he said, "should eliminate price controls, service mandates and a tangle of subsidies that keep competitors from entering the market," so that Michigan’s telecommunications infrastructure could catch up with the state’s global competitors in Asia and Europe. Reed also called for reforms of the state’s environmental regulations, including a rejection of the proposed Water Legacy Act, saying: "Michigan already has generous statutory powers to protect its water supply. We do not need to turn Michigan’s citizens into squatters when it comes to their own water supplies."

Reed’s final topic was education policy, where he began by saying, "I would love to talk about educational quality, … but all the education talk in Michigan these days is about money." Reed called for two major reforms: exempting the state’s school system from the Prevailing Wage Act, which regulates contracting for construction services; and changing the provisions under which school districts contract with health insurance providers, such as MESSA (affiliated with the Michigan Education Association), so that it would be easier to competitively bid these services and save money on health insurance costs. Reed argued that the Prevailing Wage Act raises construction prices for schools by $150 million annually and "kills" construction jobs, and his criticisms of it were particularly strong: "There is simply no good reason to keep this dinosaur alive. You can’t be in support of doing things for kids if you’re not willing to euthanize this pointless law."

The entire text of Reed’s speech is posted at